Exploring the Impact of Growth Capex
Investments made in excess of depreciation are a crucial foundation for financial growth, as highlighted by the Citi equity team.
“While capex growth has shown strength in recent times, what’s truly promising is the increasing focus on growth expenditures rather than mere replacements,” noted strategist Scott Chronert in a recent briefing.
“At a broad index level, the immediate impact of growth capex might be diluted by macroeconomic factors,” Chronert elaborated. “Yet, over the long haul, there’s a strong argument for incremental growth capex as a fundamental force.”
“Intriguingly, across almost all cross sections on a yearly basis, companies in the top tier based on our growth capex criterion tend to experience higher sales growth and sustain a better EBITDA margin over the subsequent three years.”
Stocks Recommended by Citi
Citi recommends a selection of promising S&P 1500 stocks with significant growth capex potential:
- Alphabet (GOOGL) – Growth CapEx ’24E ($MLN) $20,305 – Growth % of Total Capex ’24E 63%
- Amazon.com (AMZN) – 2.3 $22,504 – 43%
- Yum! Brands (YUM) – 1.7 $159 – 56%
- RH (RH) – 2.5 $103 – 59%
- Winnebago Industries (WGO) – 3.0 $54 – 65%
- PepsiCo (PEP) – 1.9 $2,804 – 51%
- Constellation Brands (STZ) – 2.8 $652 – 63%
- Dollar Tree (DLTR) – 1.6 $511 – 41%
- J M Smucker (SJM) – 1.8 $248 – 52%
- Simply Good Foods (SMPL) – 2.4 $7 – 62%
- Merck (MRK) – 2.5 $2,035 – 53%
- Exelixis (EXEL) – 2.3 $15 – 36%
- Glaukos (GKOS) – 4.0 $12 – 57%
- Sunrun (RUN) – 4.6 $2,102 – 81%
- Lockheed Martin (LMT) – 1.7 $771 – 46%
- Equifax (EFX) – 1.7 $241 – 40%
- Analog Devices (ADI) – 3.0 $927 – 73%
- Nucor (NUE) – 2.3 $1,284 – 58%
- Steel Dynamics (STLD) – 3.5 $1,254 – 76%
- Alexandria Real Estate (ARE) – 5.9 $2,591 – 70%
- Equinix (EQIX) – 1.9 $1,529 – 48%
- EastGroup Properties (EGP) – 3.5 $433 – 72%
- Duke Energy (DUK) – 2.2 $7,351 – 58%
- Xcel Energy (XEL) – 2.3 $3,441 – 58%
- Edison International (EIX) – 2.3 $2,633 – 50%